TheCorporateCounsel.net

October 31, 2003

FASB Moves on Expensing Options

On Wednesday, according to AccountingWeb.com, the FASB decided to mandate the expensing of options beginning in 2005 and will require the “modified prospective” approach for all companies (currently there are 3 different methods that are permissible). It had previously decided not to mandate any single formula for determining the value of options, but now has decided against allowing this level of flexibility. Rule proposals are still expected in early ’04.

Corporate Governance Committee Evaluations

For TheCorporateCounsel.net members, in our “Governance/Nominating Committee Portal,” we have posted our first sample corporate governance committee evaluation – in Word and PDF.

When developing this evaluation, I believe its important for the governance committee to consider how it performed relative to the issues that the SEC has raised in its two recent proposals that deal with nominating committees, such as:

– how the committee performed when it received shareholder nominations (including how well it made shareholders aware of its process), and

– how the committee performed when it considered incumbent directors for re-nomination

[Most common question these days: When will the SEC approve the SRO listing standards, which were supposed to be “any day now”? Answer: Nobody seems to really know anymore.]

SEC Approves NASD’s “Hot Issues” Rules – Finally

The SEC approved a NASD proposed rule change regarding restrictions on the purchases and sales of IPO offerings of equity securities for comment. This rule change was first filed with the SEC in late 1999 and is on its 5th amendment.

The new NASD Rule 2790 will replace the current NASD Free-Riding and Withholding Interpretation. Rule 2790 generally prohibits NASD member firms from selling a “new issue,” as defined, to an account in which a restricted person has a beneficial interest. “Restricted persons” include most brokers-dealers and their personnel and most owners and affiliates of a broker-dealer, and certain institutional account portfolio managers.

Rule 2790 does not include the NASD proposed prohibitions on “quid pro quo allocations” and “spinning”, which were filed by NASD with the SEC on September 15, 2003. Thanks to Mike Holliday.